Commercial Paper Procedures

Beginning November 9, 2005, Wake County began a monthly account review of capital expenditures to determine the amount of commercial paper issuance needed to reimburse County for capital transactions in accordance with the bond referendum as follows:

Schools	$225,000,000
Libraries	18,000,000
Open Space	26,000,000
Wake Technical Community College	40,000,000
Total	$309,000,000

With the start of commercial paper program, the County will begin sending funds to the school system every other week, instead of on the 15th and the last working day of the month. As an example, the school system is set to receive funds on Friday April 28, 2006. In preparation for the draw, school staff will send their draw request to the County’s Debt Manager on Friday April 21. The following Monday, the Investment Analyst will send notification to the Bank of America (BOA) trading desk of estimated amount of commercial paper issue. On Wednesday April 26, the Investment Analyst will finalize the sale with BOA and the County will receive its funds on Thursday for transfer to the School System on Friday April 28.

Upon receiving the request from the schools, the Debt Manager will determine the total amount of unreimbursed bond expenditures for all four above purposes since the prior commercial paper issue. After determining the total amount of new commercial paper to be sold, the Investment Analyst and the Debt Manager will place an initial warning call to the broker/dealer Bank of America (BOA) to notify them of funding needs anticipated. [Note: The minimum amount of a commercial paper the County can issue is $100,000 with that amount increasing in $1,000 increments.] The County will issue commercial paper, rounding down to the nearest $100,000 of unreimbursed expenditures.

Once an amount of issue has been determined and the initial notification call has been placed, the Debt Manager will work with the Issuing/Paying Agent to complete the “Form of CP Order” found in Exhibit E of the Bond Resolution Adopted on September 19, 2005 and file paperwork with the Broker/Dealer, Bank of America (BOA). A blank electronic copy of the Form of CP Order can be found on the Finance shared drive at “S:\2005 Commercial Paper Program.” After the order form has been completed, it will need to be approved by the Finance Director, Deputy Finance Director, or Accounting and Reporting Manager. A completed, signed copy of the order form will then be faxed to the rating agencies, the Local Government Commission, Waters and Co., as well as BOA. [Finance staff will work towards procuring and setting up a network printer that has scanner ability in order to email completed notifications to interested parties.] Upon the confirmation that paper has been sold, BOA will settle and wire proceeds to the County’s Issuer/Paying agent who will deposit the proceeds into the County’s Commercial Paper Program Account, which is treasury general ledger code 167. BOA will need to notify the Finance Director, the Deputy Finance Director, the Investment Analyst, and the Debt Manager that the paper has settled and the proceeds wired. The intent of this process is for the proceeds of C/P issued to be deposited into the County’s account on the business day prior to the one in which the funds are required to be transferred to the school system. The Investment Analyst will set up the wires to move funds from the commercial paper clearing account to the Wachovia General Fund account as soon as the funds are received on Thursday. Fees and charges related to the Commercial Clearing account should be charged to the Wachovia General Fund account.

The Debt Manager will be responsible for posting the journal entries to record issued commercial paper in FAMIS and maintaining the EXCEL spreadsheet that details the type of commercial paper sold by CUSIP #. Wachovia staff will be responsible for maintaining the Wachovia ISS Money Market system, affirming commercial paper issuance in the Wachovia system after BOA has input instructions and released them; however, the Debt Manager will need to monitor this system and reconcile it to the County’s general ledger. The Debt Manager will need to complete a monthly three-way reconciliation of the commercial paper issued per the spreadsheet to Wachovia’s ISS Money Market system as well as to the FAMIS financial system.

The Investment Analyst will post the journal entries in FAMIS that record the cash transfers from the commercial paper cash clearing accounts to the County’s general Fund account at Wachovia. In addition, the Investment Manager will be responsible for routinely providing interest maturity amounts and dates related to commercial paper to the County’s cash flow consultant, Davenport, for cash flow forecasting purposes.

CUSIPs - Each commercial paper issue will have its own cusip number that Finance will use to track within the FAMIS financial system. Subsequent rollovers are discussed below; however; rollovers will retain the same core cusip numbers, with a change in the ending number.

Each eighteen (18) months for IRS purposes, the County will be required to start a new commercial paper “program” and ultimately, each of these commercial paper programs will be a separate general obligation bond series issue upon maturity at end of authorization (i.e., Series A, Series B, etc.).

As existing notes mature at 270 days, or an earlier time frame as market conditions warrant, the County’s Debt Manager will work with BOA to refinance the principal amounts of each commercial paper issue until the entire $309,000,000 of the authorization is spent out and all Commercial Paper is converted to permanent financing. At rollover, the County will be responsible for paying interest on maturing commercial paper. The paying agent will be contacted by Debt Manager to confirm the interest payment amount and date. The County’s liquidity provider, Wachovia, will be ready to purchase any roll-over notes that BOA is unable to sell.

Upon the confirmation that paper has been sold, BOA will settle and wire proceeds to the County’s Issuer/Paying agent who will deposit the proceeds into the County’s Debt Service fund that is maintained by the Paying Agent to pay the principal amount of CP Notes due at maturity.

Since the County will be required to pay interest on maturing essentially all commercial paper once entire authorization is spent down, the County will need to plan and be prepared to deal with a potentially large interest payment at that point. (See Cash flow and Liquidity)

A bank template will be set up so that Finance Director, Deputy Finance Director or Investment Analyst can execute it. Our current roles and backups will be in effect for this program similar to other debt payment processes. See roles and responsibilities below.

The Debt Manager determines amount of CP issue every other week. In case of holiday or weekends, the previous work date is used. Once this amount is determined, it is communicated to Investment Analyst using FinInvest e-mail. Use of this email address provides information to all backups in case backup personnel execute the procedures.

Investment Analyst places the pricing call and Debt Manager prepares the “CP Order Form”.

Finance Director, Deputy Finance Director, or Accounting and Reporting Manager sign the “CP Order Form.”

Investment Analyst moves funds to final destination no later than the Thursday prior to the School System’s check release date of Friday.

Debt Manager will prepare CP Principal & Interest statement and notify the Investment Analyst, Finance Director and Deputy Finance Director via email that file is updated on the S:Drive under the Treasury folder. Each person involved in this role will have access to this folder.

Debt Manager is responsible for verifying by end of day that interest payments were received by paying agent.

The first 3 CP issues will be scheduled so that Finance Director, Deputy Finance Director, Debt Manager and Investment Analyst can be present and use as a training opportunity.

Deputy Finance Director and Finance Director are backups for any of the above processes and must be notified by either party above if they will not be available to carry out their duties.

Deputy Finance Director, Finance Director, or Accounting and Reporting Manager are approved for signatures on “ CP Order Form”

The County currently has a liquidity position of $25 million. Liquidity has been raised to $35 million since the County will be funding non-school CIP expenditures for a two week time period each month.